Harman International Industries - Cheap Or Dear?

The following two sentences, written by the great Benjamin Graham in the introduction for the fourth and final edition of The Intelligent Investor, have forever been my guide to the purchase and sale of securities:

“For 99 issues out of 100 we could say that at some price they are cheap enough to buy and at some other price they would be so dear that they should be sold.  The habit of relating what is paid to what is being offered is an invaluable trait in investment.”

I am sure you can easily see the common sense in the idea of price relative to value. It’s such a simple concept and relevant to all investor types, whether they use individual securities or funds; active management or passive. Yet the idea of “cheap and dear” have been erased by investment practitioners who promote efficient markets, asset allocation, passive investing, smart beta, and a host of other data mined approaches that have worked for someone at some point in the past.  Personally I am pleased with these current promoters and their applications to the management of portfolios, as it is their actions that create cheap and dear prices for us.

I will share with you an example of what we view as an issue currently available for purchase cheaply, but first I wanted to share with you two recent birthday presents I received that are closely related to the discussion at hand. Yes, I had another birthday last month. Every year on the day of my birth I say a little prayer of thanks, along with a special request that the Almighty will give me one more. If you need someone to add to your own prayer list, I could surely use the help! And if you are curious as to what my presents were, here is a little hint: they are great additions to my library that I would recommend to any of you. 

It has been a while since I shared our family’s birthday traditions with you. Whoever’s special day it is gets to choose any place they want, within reason and locality, for the family to gather and eat dinner. As our family has grown over the years we’ve visited just about every restaurant in Rock Hill and many in the neighboring community of Charlotte. This year, I wanted to do something different– stay home and have a favorite meal from our past when times were lean and the kids were little, our family’s take on Salisbury Steak. 

Our version of the recipe is a simple one my wife makes out of hamburger and a couple cans of soup, and it was always paired with the largest bowl of real mashed potatoes ever seen by three youngsters. I may have secretly just been testing Kathy to see if she still has a little bit of love left for me. You see, she has been a vegetarian for a decade. Just looking at a pan of raw meat was difficult for her, so preparing and cooking my favorite dish certainly took a lot of love.

After all these years Kathy still knows what else I truly appreciate, and that is books on investing. She went out of her way this year and gave me a wonderful book, The Great Minds of Investing. It’s a special book, filled with beautiful photographs of the great investors taken by Michael O’Brien, and matched with revealing profiles written by William Green. It is fairly expensive as books go, but would be a valuable addition to your investment library and look great on the coffee table. 

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Anderson Griggs & Company, Inc., doing business as Anderson Griggs Investments, is a registered investment adviser.  Anderson Griggs only conducts business in states and locations where it ...

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